MADISON, Wis.— A new study finds a number of “troubling” statistics related to women and finance.
The research from the Filene Research Institute, “The Gender Gap: Troubling Financial Capability Findings Among Women,” examines what the authors say is the unique financial challenges of women. Filene said the information on assets, liabilities, knowledge, and advice seeking that is analyzed in the report construct a telling profile of American women.
George Hofheimer
Among the worrisome trends, according to the authors, is the finding that among women aged 51–61, just two-thirds report that they (or their spouse) have a retirement account. “Additionally, women often engage in expensive credit card behaviors, feel burdened by debt, and are financially fragile, particularly the young and unemployed,” the authors stated, adding that all of these issues are exacerbated by low financial literacy and a reluctance to seek advice.
“Private wealth in the United States is estimated to reach $22 trillion by 2020,” said Annamaria Lusardi, Academic Director of the Global Financial Literacy Excellence Center at George Washington University and lead researcher on the project. “Half of that money will be in the hands of women and, like many groups, women overestimate their ability to manage those finances.”
Filene reported that among survey respondents taking a five-question financial literacy test, only one-quarter of women were able to correctly answer the three simplest questions—about interest, inflation, and risk diversification (indicating a basic level of financial literacy)—compared to 47% of men.
Advice Offered
George Hofheimer, chief knowledge officer for Filene, agreed that the findings are worrisome, and offered this advice. “Credit unions have the opportunity to provide advice and products that are specifically tailored to the needs of women.”
“The Gender Gap” is the final report in a series of Fiserv-sponsored reports on the financial state of four key American demographics—Gen Y, pre-retirees, Hispanics, and women.
The “The Gender Gap: Troubling Financial Capability Findings Among Women” repot is the latest in a series published by Filene. The first, “Gen Y Personal Finances: A Crisis of Confidence and Capability,” probed the struggles Millennials face in regards to personal financial management. Millennials are at critical stages of long-term financial decision-making, poised to make choices that carry serious implications for the future.
That study found that as a group, Millennials feel overburdened with debt. Two-thirds (66%) of all Millennials have at least one source of outstanding long-term debt, whether student loan, home mortgage, or car loan, and 30 percent have more than one source of long-term debt. To offset this debt, they are relying on expensive borrowing methods such as credit cards, payday loans, and alternative financial services, the report stated.
The second report, “Financial Capability Near Retirement: A Profile of Pre-Retirees,” suggests pre-retirees and Gen-Yers have similar financial needs. In fact, 60% of pre-retirees have at least one source of long-term debt. Pre-retirees’ greatest source of debt is home mortgages (44%), Filene said.
Other Groups Also Have Specific Needs
While 51% of Gen Y respondents reported having retirement accounts, nearly 30% of pre-retirees do not. Baby Boomers additionally report using their credit unions less in retirement for a variety of reasons including having retirement assets elsewhere and lack of convenience.
Just as women face unique socioeconomic challenges, so do Hispanics. In another Filene report, Hispanics, like many distinct racial groups, have specific financial needs. The report, “Financial Capability Among Highly Educated Hispanics,” found that eight-in-10 highly educated Hispanics have at least one credit card, and half of these cardholders report behaviors that can damage credit scores, increase interest rates, and harm their future borrowing capacity.
Thirty-five percent of the respondents in that study indicated they used one or more alternative financial services (like pawn shops or payday lenders) within the five years preceding the survey while 22% reported taking loans or hardship withdrawals from their retirement accounts. Very rarely does this group seek help for their financial struggles as nearly 60% feel that financial advisors are too expensive.
According to Filene, there are steps a credit union can take to help, including:
- Effective messaging is needed to encourage baby boomers to be mortgage free in their retirement years. But in order to create impact, credit unions should also support that messaging with mortgage products that offer fixed-rates and are designed to ease the mortgage burden in the retirement years.
- Debt management tactics will resonate with Millennials.
- It will be critical to offer low-cost products and services to eliminate the need for Hispanics to engage in expensive financial behaviors. Spanish-speaking financial advisors can help foster a culture of comfort and trust for Hispanic members.
- In light of women’s low levels of financial literacy and the unique challenges they face, channels and counseling should be directed at women. Women differ broadly over demographic categories, like age and marital status. For this reason, customized advice through counselors or remote channels should be provided, Filene said.
For more info: www.filene.org.